Image Source: Google

Image Source: Google

The US Congress has passed a budget bill that would cut $38.5bn in government spending over the rest of the financial year. This measure, which was agreed on Friday, passed by 260 votes to 167 in the House and 81 to 19 in the Senate. The bill is expected to be signed by President Obama . With its route, Republicans and Democrats will turn their attention to a fight over next year’s budget.

The budget bill was crafted after weeks of loaded discussions between the White House and congressional Democrats and Republicans, six months after the last budget expired. During discussions, Republicans pushed for greater spending cuts than Democrats had been willing to grant. The ballooning US deficit is forecast to reach $1.5 trillion this year and is set to be a top issue in the 2012 election campaign, with Democrats and Republicans offering complementary visions on how to reduce it.

Jacob Lew, director of the White House Office of Management and Budget, said on Thursday that all parties believed it would be unlikely for the US not to meet its debt obligations. The 2011 budget bill passed by Congress, which covers the financial year up to 30 September, slashes some domestic spending but also relies on accounting changes that some economists say create the illusion of deeper spending cuts.

Though Republican negotiators led by Speaker John Boehner in the House of Representatives initially pressed for $61bn in budget cuts, many forecasters in Washington have scored the budget bill as a victory for the Republicans. The debate over the budget for the fiscal year 2012, which begins on 1 October, has already begun in earnest.

Just last week, Republican House budget committee chairman Paul Ryan introduced a budget proposal that would slash $6.2 trillion in government spending over the next decade. It would achieve those cuts in large part by requiring the elderly to pay more for their healthcare than they do currently and cutting healthcare and social programmers for the deprived.

Moreover it would lower taxes for the wealthy, move financial conservatives say will boost US economic growth. President Obama on Thursday defended his call for raising taxes on the wealthy, made in a speech a day earlier focused on debt reduction. President Obama said all Americans must share the burden of reducing the long-term budget deficit. Obama’s fiscal policy plan, set out on Wednesday, also includes changes to social programs.